Those of you who work in HFs, what do you invest your personal assets in?
Have heard elsewhere that most people working in hedge funds personally invest in index funds, is that true or do you do something else/what do you do?
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Yes, in an index, but not because we have no confidence in ourselves. There are restrictions on personal trading of securities when you work in asset management.
Pretty much this. Whatever I can put in the fund(s) go to that, but everything else is pretty much either locked away under management of a blind trust or put into broad indices.
As much as possible in firm funds (ie. max out whatever allocation they give me), rest in low fee index fund.
Yeah, I can invest in individual stocks, but there are lots of restrictions, and it's easy to get "locked into" a position if some other team starts trading it. Generally speaking, it's not worth the effort.
Also, like, I have a day job: if my ideas are any good I should be advocating for them to go into the fund; there's more upside from that than having it in my PA.
It may not be possible to trade whatever you want in a big fund. There may be limits on risk and factor exposure, or your ideas may not fit into the existing investment process, which can sometimes be very specialized and unique to a fund. I had many ideas that I only started to try on my own after I left the industry and had no restrictions on my PA.
thank you so much.
As others have mentioned, there are too many restrictions when it comes to investing in individual stocks. Purely because of those restrictions, its not worth the effort to invest in individual stocks apart from a handful of scenarios (long term thematic bets). So majority of the people invest in index funds in their PA.
Why don’t most of you invest in your own funds?
There are legal and firm level restrictions on such things as well. Differs from places to places, but I think the norm is that most of us are only allowed to invest our bonuses or some portion of it back into the firm. Strategies have limited capacities, investors may not like the competition.
thanks for the insight all
- A portion in global equities (index funds, lots of compliance restrictions in what I can invest in e.g. no individual stocks, no concentrated ETFs)
- A portion in my current LS fund (why not all of it? because I can tolerate more equity risk than my fund's investment mandate therefore makes sense to invest in equity exposure)
- A portion in co-invest in my old PE firm (wish I hadn't, it's basically just levered SMID exposure)
- A portion in crypto (YOLO, call option)
Keep bulk of it in my PA, which is basically longer-term positions in my coverage universe (~50%)
Keep a lot in savings for flexibility (~20 - 25%)
Have a bunch of deferred invested in the fund (~20%)
Have a small amount in Bitcoin, but am growing the exposure because I’m a nut and probably overly concerned about the USD longer term (5 - 10%)
When I worked at a hedge fund we had a mandatory hold period for any investments... ie you could buy equities (as long as they weren’t on the restricted list), but you had to hold them for a certain period of time (even if everything went tits up) so I never did
Fund, real estate, some private investments, and cash.
diversified etfs (medium)
cash (large)
cryptocurrencies (small)
small businesses (small)
invest in myself (medium)
alternative lending (medium)
historically I could not pick single stocks even though I felt like I did have an edge. Now I actually can do so, but I still choose not to because I am so short on time. I think for now my incremental time is just much better spent working than it is trying to beat the market, but I expect this trade off will change over the next 5 years.
How did you get started investing in small businesses? This is a goal of mine longer term.
There is a business that I started myself. I spent a 2 months period between jobs doing nothing but reading books on different startup related topics (marketing, design, HR, product management, etc). It's a work in progress, but I hope to invest about $100K this year in my own business. So far I have invested just $1K. Doing this is really hard. I spend most of my weekends on it.
Yeah I invest in SPY and leave it there, don't want to deal with all the legal issues and I'm mainly working a lot
To the index fund question, yes - but depends on the fund and the restrictions on personal trading. Some funds don't allow any personal trading/investing, some allow full access. I'm solely allowed to trade ETFs/invest in mutual funds so if there's certain sectors or names I want exposure to that are not already in our portfolio then that's how I'd go about it.
Bulk of my $ is in a variety of vehicles, the fund itself, roth IRA, index funds/ETFs like I mentioned. Breakdown probably looks like:
- ~60% in the fund I work for
- 20-25% in roth IRA, personal trading accounts, ETFs/mutual funds
- 10-15% in either cash/currency/Bitcoin
Every fund I know of will have holding periods and restrictions, that is why many HF employees invest in mutual funds/etfs. I have a mix of:
Fund I work at (large)
real estate (medium on the investment piece, large if you count primary residence)
cash (medium)
Diversified mutual funds (small/medium)
At the credit funds I've been at I can invest stocks/bonds, just need to get the trade approved (really just a cross check to anything we have non public info on and I'd know before requesting so its really just a formality). Unlike some posters above, I prefer to invest in names I cover at work, I mean why not leverage my work into my personal life. If anything my single stocks/bonds tend to be exclusively things I cover at work because I don't have time for other research. Apart from individual names, I'm invested in my funds, ETFs, BDCs, cryptos, a growth equity fund where I know a founder, and a multifamily property. As I write this it sounds like its a lot more dollar value that it is...sadly its not.
Would like to know if any of y’all HF guys invest in natural resources — copper, uranium, aluminum, cobalt, scandium, lithium, etc. Just assuming that not too many HF’s are active in this space so conflict of interest wouldn’t exist and you can simultaneously make fat returns.
I keep it pretty simple with 95% of my investments in big, equity ETFs (SPY, IWM, VSS, QQQ) that I hope to never have to sell as long term savings assets. Then, I keep about 5% in a trading account to punt around options- also on indices/ETFs. I trade no single stocks as it would be a compliance headache and I would rather focus on making more USD at my day job so I can invest in more equity beta for my personal net worth.
Also, I don't know about you guys, but if I'm trading actively and in size in my PA I find it harder to be truly intellectually honest in my investing at work. This didn't really matter as much until I became a PM/decision maker but I think that earlier in my career I would sometimes have blinders on because I "hoped" or "wanted" something to happen so that my PA would benefit.
That last point is very insightful about "wants" clouding judgement. Never thought of that, but it makes sense.
Former sell-side guy here....would also note that specializing in an industry gives you more respect for the market as a whole. You can't invest in your sector as most have pointed out, but on top of that, I knew so much about my sector that I became pretty intimidated about investing in other sectors.
In my opinion, even a very smart generalist would have been a complete idiot to invest in my space. That made me respect other sectors more and made me less inclined to think that I've got it all figured out. So, strangely enough, the more I learned about my sector, the less I wanted to invest in single stock picks for other sectors.
In short, the more knowledge you gain about your niche; the more humbled you become about other people's niches and that makes you a more hesitant investor.
never thought about that, but it makes a lot of sense. Thanks for the insight. Do you invest in indexes/etfs in light of that realization then?
Yes exactly. I keep it simple with ETFs. Occasionally, I will invest a little money in individual stocks or options, but I acknowledge to myself that I'm purely gambling when I do that.
No one that I can see has mentioned tax efficiency.
Virtually everything I do is intended to minimize tax burden. So even if we talk about investing in SPX/SPY, what I actually do is a find the most tax efficient way to get that exposure (which is not just buying spy btw)
if you're willing to share, would love to hear how to minimize tax burden lower than just buying SPY and holding
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